We present a ‘new and improved’ version of Rabo’s Emerging Market Vulnerability Heatmap which is constructed from a more comprehensive list of inputs. The heatmap highlights ARS, TRY and ZAR as the most vulnerable emerging market currencies.

Turkey’s economy expanded by 4% last year, but Russian sanctions and weaker tourist arrivals will negatively affect growth this year. In spite of the AKP’s regained parliamentary majority, Turkey’s political situation remains volatile which could once more weigh on essential foreign capital inflows.

Global growth holds up in 2016, but does not accelerate. With the US poised to hike interest rates, the rest of the world waits anxiously. Normalization of monetary policy poses economic risks, but so does keeping it too loose for too long.

Economic growth in EMs disappoints again due to lower commodity prices and China’s slowdown. Higher growth in the Eurozone will result in a pick-up of growth in developed countries, but this will not be enough to prevent a slight slowdown in global growth.

Political pressure on the central bank ahead of parliamentary elections contributed to a strong depreciation of the Turkish lira. Concerns about a possible executive presidency after elections and more populist economic policies unnerve investors.

While Turkey’s economic growth started to slow in the second quarter, the central bank faces pressure to reverse its major January interest rate hike ahead of the 2015 parliamentary elections. As expected, Recep Tayyip Erdoğan became Turkey’s first directly-elected president.

Turkey’s external vulnerabilities decreased in the first quarter of this year, as the current account deficit started to decline and net capital inflows resumed. Meanwhile, Prime Minister Erdoğan’s dominant position was strengthened by his party’s victory at the March 30th municipal elections.

Turkey’s economy is heading for a slowdown this year, as external financing conditions deteriorate and the central bank had to hike interest rates strongly to defend the lira. The AKP will likely win the upcoming municipal elections, even as an ongoing corruption probe may cost it some votes.

Turkey’s large current account deficit and its small stock of foreign reserves make it vulnerable to the effects of tapering by the US Federal Reserve. Meanwhile, there have also been several important political developments.